•  Venture

Propel(x) Review: Invest in "deep-tech" startups

Propel(x) is a niche Reg D platform offering curated investments in startups in “deep tech” fields, such as life sciences, aerospace, and clean energy. Propel(x) notably leverages a network of industry experts to review their offerings. Investors can invest directly with companies, or through a managed syndicate.

Propel(x)

  • Investment Types: Venture
  • Sectors: Biotech, Healthcare, Big Data, and Technology
  • Minimum Investment: $5,000
  • Must be accredited
 Pros
  • Unique niche on "deep tech" startups
  • Emphasis on due diligence and curation of investments, including review by network of industry experts
  • Strong investor education materials
 Cons
  • Open only to accredited investors
  • Startup investments are inherently risky and highly illiquid
  • Small number of open investments (typical of niche platforms)

Overview

Propel(x) is a woman-led investment platform founded in 2014 by two MIT alumni (who also co-founded the MIT Alumni Angel Group), with a focus on “deep tech” startups. Propel(x) curates startup offerings for investors, who can choose to invest directly with the startup, or through an intermediary syndicate managed by Propel(x). Their investor education materials and FAQs are excellent, and a key differentiator is their network of industry experts who assist in deal evaluation. Propel(x) is well worth a look for investors interested in startups with a focus on life sciences, clean tech, and similar offerings.

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Types of investments Propel(x) offers

All of the companies raising money on Propel(x) are “deep tech” startups, which Propel(x) defines as “companies founded on a scientific discovery or meaningful engineering innovation”. More specifically, that means fields like biotech, biopharma, medical devices, clean energy, synthetic biology, data science, aerospace, food science, and artificial intelligence (AI). Propel(x) also looks for startups that are already connected to established incubators, research labs, or similar institutions.

Companies raising on Propel(x) range from early-stage through to late-stage, with total amounts being raised ranging from a few hundred thousand for a seed round up through multi-million-dollar later stage rounds (some startups raise multiple rounds through Propel(x)).

What do you get when investing with Propel(x)?

Details vary by investment, but most companies raising on Propel(x) use convertible debt, preferred equity, or SAFEs. Investors who choose the syndicate option (which has significantly lower minimums) are actually investing in a special-purpose entity (SPE) which in turn holds the actual underlying securities (which also simplifies the raising company’s cap table). For some offerings, investors can also invest directly with the company, though for much higher minimum amounts.

How does Propel(x) make money?

Propel(x) charges the companies raising on their platform a success fee ranging from 5-8% of the amount raised. Investors who choose the syndicate option pay a one-time 7.5% “platform fee”, as well as 10% in carried interest upon a successful exit. Investors who choose to invest directly with the company pay a one-time 2% platform fee, and their investment is not subject to any carried interest.

Potential returns and cashflow

Investments via Propel(x) are high-risk investments in startups. Most of the investments have no explicit expectation of payments, dividends, or other cash flow. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.

Breadth of offerings on Propel(x)

As of this writing, Propel(x) has closed more than 100 offerings, and currently lists 4 open investments (with one overcommitted and not taking further investments).

While you’ll need to register to review full details, it’s nice that Propel(x) displays summary info about all current (and past) investments, including the amount raised.

Regulatory framework and due diligence expectations

Propel(x) offers investments using SEC Reg D, and currently only offer access to accredited investors. Investments through Propel(x) are actually offered through Hubble Investments, a wholly-owned subsidiary of Propel(x) that is also a registered broker-dealer. Broker-dealers are subject to specific due-diligence requirements to ensure an investment is “suitable” for their registered customers, or they can face fines and civil action. (That does not of course provide any guarantees about investment return or performance!)

Propel(x) emphasizes their role in curating and selecting investments, including review by their network of industry experts. While that should not be a substitute for your own due diligence before making any investment, it is a different approach than some other platforms offering similar investments, and which function more like marketplaces.


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